Tag Archives: Bridgewater Associates

What’s a better investment — U.S. bonds or the underside of your mattress? Ray Dalio wonders if it’s the latter.

Dalio founded the hedge fund Bridgewater Associates. He tells the Council on Foreign Relations: “You are quite close to cash under the bed being better than Treasurys. Because essentially you know you’re going to get it back if it’s under the bed.”

The rate on the 10-year Treasury note is about 1.7 percent. Earlier this summer, it scraped to its lowest on record, under 1.4 percent.

Dalio says the risk of super-low returns is that buyers of Treasurys, including foreign governments that finance U.S. government deficits, will go elsewhere as soon as a reasonable alternative emerges.

Hedge fund god Ray Dalio, who runs Bridgewater Associates, is widely considered to be the most successful hedge fund manager in the world. He recently sat down with CNBC’s Maria Bartiromo to discuss a variety of topics at the Council on Foreign Relations and he had some advice for the average investor.

During the hour-long discussion, Bartiromo asked Dalio about portfolio allocation in terms of gold versus equity versus real estate and other asset classes.

First, Dalio explains what you need to think about when setting up a portfolio. The key here is asset allocation.

“So I think I’m going to answer it in the following way that I think that is the right way for people to look at it. It’s the way I look at it. I think that the first thing is you should have a strategic asset allocation mix that assumes that you don’t know what the future is going to hold. And I think most people should…”

Ray Dalio was the hedge fund world’s most successful investor in 2010 and 2011, with his $120 billion Bridgewater Associates LP. His firm invests based on his understanding of macroeconomic principles.

In his second-quarter letter , Dalio said he believedglobal equitymarkets were pricing in “fairly pessimistic” long-term earnings growth rates and the worst real earnings growth rate in 100 years, while companies still “retain plenty of ability to protect their operating margins and profitability by keeping labor costs down,” despite global financial conditions posing a headwind to top-line revenue growth. He also noted that the dividend yield of U.S. non-financial corporation is higher than U.S. government note yields for only the second time in the past 50 years, and companies had ample liquidity to cover their dividends.

Analyzed by GuruForce, these are Dalio’s biggest new stock purchases in the second quarter…

The Wall Street Journal’s Greg Zuckerman reported that hedge fund manager John Paulson personally netted more than $5 billion in profits in 2010—likely the largest one-year haul in investing history, trumping the nearly $4 billion he made with his “short” bets against subprime mortgages in 2007.

Mr. Paulson’s take, described by investors and people close to investment firm Paulson & Co., shows how profits continue to pile up for elite hedge-fund managers. Appaloosa Management founder David Tepper and Bridgewater Associates chief Ray Dalio each personally made between $2 billion and $3 billion last year, according to investors and people familiar with the situation. James Simons, founder of Renaissance Technologies LLC, also produced profits in that range, say investors in his firm.

By comparison, Goldman Sachs Group Inc., Wall Street’s most profitable investment bank, paid all of its 36,000 employees a total of $8.35 billion last year. James Gorman, chief executive of 76-year-old investment bank Morgan Stanley, is expected to receive compensation of less than $15 million for 2010.

Mr. Paulson and his fellow managers seldom take much of their profits in cash. Some of the profits are so-called paper gains, which reflect the rising value of their firms’ holdings, and could erode if those investments sour. Other gains come from selling investments, and most of those are rolled back into their funds.

Mr. Paulson and the other top managers made winning bets on commodities, emerging-market companies, bank shares and U.S. Treasury bonds, among other investments. These moves, along with profitable picks by other funds, are part of the reason the hedge-fund industry is back on its feet after a rough stretch. Assets managed by hedge funds have grown to a near-record $1.92 trillion, up 20% over the past year. Assets jumped almost $150 billion in the fourth quarter alone, the largest quarterly growth on record, according to Hedge Fund Research, Inc.